What Happened?
Shares of homebuilder Taylor Morrison Home (NYSE: TMHC) fell 5% in the afternoon session after the company reported second-quarter results that pointed to softening demand and pressure on future profitability. While the homebuilder's revenue of $2.03 billion beat Wall Street estimates, investors focused on several concerning trends. The company reported a 12% year-over-year decrease in net sales orders and a significant jump in its cancellation rate to 14.6%, up from 9.4% in the prior year. Furthermore, Taylor Morrison noted an increased reliance on speculative homes, which are built without a specific buyer in place and can carry lower margins. These spec sales accounted for a high of 71% of all sales. Management indicated that this shift, combined with higher incentives, was likely to weigh on gross margins going forward, and the company's earnings per share of $1.92 slightly missed analyst expectations.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Taylor Morrison Home? Access our full analysis report here, it’s free.
What Is The Market Telling Us
Taylor Morrison Home’s shares are not very volatile and have only had 9 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 4 months ago when the stock dropped 5.4% on the news that stocks gave back some of the gains from the previous day as the White House clarified the tariffs on imports from China would add up to 145%, while the baseline 10% tariffs remained in place for all countries. This reminded markets that the global trade environment remained volatile, limiting the potential for sustained gains.
Also, President Trump said he was willing to accept pain in the short term, and was aware his policies could cause a recession, but he remained more mindful of a more severe case of economic depression (higher unemployment and prolonged downturn). For investors, this suggested that the administration could prioritize long-term structural shifts over near-term economic stability, further increasing policy-driven risk in the markets.
Taylor Morrison Home is up 1.2% since the beginning of the year, but at $61.27 per share, it is still trading 18.1% below its 52-week high of $74.80 from November 2024. Investors who bought $1,000 worth of Taylor Morrison Home’s shares 5 years ago would now be looking at an investment worth $2,553.
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